Navigant Research Blog

The Internet of Things (IoT) trend continues to make inroads among companies around the globe, according to new data from telecom giant Vodafone. Its latest survey on the topic finds more than a quarter (28%) of responding companies are already using IoT in their operations, and three-quarters (76%) say the IoT will be critical for the future success of any organization in their sector.

While this trend continues to be transformative for many businesses, one of the remaining barriers to IoT adoption is security, or the lack thereof. Nearly one in five (18%) survey respondents say the concern about security breaches is a potential barrier to wider IoT adoption within their companies. From an energy industry perspective, robust security is still key, of course, given the critical nature of the infrastructure and data. The survey indicates some positive moves in this regard, with nearly six in ten (59%) energy and utility companies working on IoT security guidelines and roughly half (52%) working with a specialist security provider. I choose to see this glass as half full, but the emphasis on the security piece could use some improvement.

Wireless Networks in Europe

Elsewhere, there is further evidence of the expanding IoT trend. In the Netherlands, telecom provider KPN has recently announced the completion of its nationwide wireless IoT network. The company also notes it has signed contracts to connect 1.5 million devices so far, and that potential customers include governments seeking to link sensors on critical infrastructure, companies that specialize in lighting and traffic control, and consumers with fobs on bicycles for monitoring location. In addition to KPN, French startup Sigfox is building a similar IoT network and is currently deploying its service in 20 countries.

One other clear sign of the growing IoT trend was the recent huge deal by Japan’s SoftBank, which is acquiring British chip designer ARM Holdings for $32 billion. The deal is the largest acquisition by a Japanese firm in Europe. The big bet by SoftBank is that ARM can become a leader in the design of chips that power IoT devices, similar to how ARM’s designs are key to the success of smartphones and tablets.

A Rising Tide

For utilities and other energy-related firms, it is hard to ignore this rising global IoT tide. The emerging technology is altering business processes, and stakeholders need to pay attention and make strategic plans. This is something my colleague Casey Talon and I point out in our Navigant Research report titled IoT Enabled Managed Services. By seizing on the opportunities of an array of IoT devices and combining the data with analytics and bundling services, utilities can improve their own operations and increase customer satisfaction. It’s a trend worthy of investment.

The Siemens acquisition of wind turbine manufacturer Gamesa has been underway for over a month now. There are predictable synergies between the businesses already summarized by Navigant Research; less predictable is what will come of Adwen, the offshore wind turbine 50/50 joint venture (JV) between Spain-based Gamesa and French industrial conglomerate Areva.

Areva has until September to decide between selling its partial ownership position, buying out Gamesa’s partial ownership, or selling the entire entity to a third party. Gamesa has valued its 50% stake in the JV at $81 million, according to its 2015 annual report. However, the actual valuation in today’s market is likely to be significantly below that due to the challenging nature of the offshore wind market. Areva is unlikely to proceed in the offshore sector on its own since the company has suffered significant financial losses on its nuclear operations and is undergoing restructuring and seeking state aid from France.

Siemens Buying the Stake?

Siemens may end up buying out Areva’s stake, but this is not preferable since it could risk regulators scuttling the deal due to anti-trust concerns. The German conglomerate already has an unquestionable lead in the offshore wind sector, enjoying roughly 62% global market share of installed capacity by the beginning of 2016, followed by MHI Vestas with 18%. Adwen represents a roughly 6% share according to data from Navigant Research’s Offshore Wind Market Updatereport.

Siemens also simply doesn’t need Adwen’s technology. Adwen has a well-proven 5 MW offshore wind turbine, with 630 MW of installed capacity, and an 8 MW turbine in very advanced stages of development (both are medium-speed geared drivetrains). However, Siemens has its own highly refined offshore wind turbine technology led by its flagship 7 MW turbine, and the company has an uprated 8 MW unit with a 180-meter rotor coming to market soon. Siemens’ expertise, R&D, and supply chain commitments are tailored specifically to its direct drive turbines (with no gearbox). Siemens is also committed to building its own blades while Adwen outsources to LM Wind Power.

In place of Siemens acquiring Areva’s stake, a more likely scenario is the sale of Adwen to another interested party in the offshore wind sector. U.S.-based GE and Germany-based Senvion are reportedly preparing bids. Adwen was selected for approximately 1,500 MW of offshore wind development in France over the next few years. Therefore, its pipeline of projects where it is the preferred turbine supplier is arguably just as much of an asset as its actual wind turbine technology.

Third-Party Players

Of the known suitors, GE has the strongest financial backing to purchase Adwen, and its earlier acquisition of France-based Alstom shows further synergies, as the acquisition provided GE with a supply chain that dovetails with some of the company’s existing supply chain in France.

The Alstom acquisition also provided GE with approximately 1,500 MW of offshore wind contracts in France. This highlights a GE acquisition’s potential downside to the marketplace, as it would allow the company to monopolize all approximately 3,000 MW of offshore projects in the near-term French pipeline.

A more market-friendly approach would be a Senvion acquisition, which would split the French offshore pipeline to two companies instead of one. Senvion could also leapfrog from its existing 6.2 MW high-speed geared turbine to Adwen’s 8 MW medium-speed turbine (medium-speed is arguably a preferred design for offshore), and would benefit from the 1,500 MW French project pipeline at a time when Senvion is seeking more business outside of its home German market. What is ultimately decided by September is an unknown, but it fits an overall pattern of consolidation among wind turbine OEMs both on and offshore.

One of the keys to Columbus winning the competition and beating out the better-known technology centers of San Francisco, Austin, and Denver was the city’s ability to demonstrate that its plan would result in increasing poor residents’ access to new transportation options. The city has proposed numerous solutions in this area. A few of the key proposals were:

An autonomous vehicle program that would transport residents from the Linden neighborhood—which has 3 times more unemployment compared to the city average—to a nearby employment center.

The creation of transit cards for low-income populations to use for ride-hailing or carsharing services, with or without having smartphones or bank accounts.

Several of these transport initiatives are also expected to be integrated with improved access to healthcare services to help address the high infant mortality rates in many of Columbus’ poorer neighborhoods.

Other components of Columbus’ transport plan include an increase in electric vehicle (EV) charging stations throughout the city, enhancing smart grid technology by using EVs as distributed energy storage devices, expanding the municipal EV fleet, and securing 50 of the city’s CEOs to personally commit to buying and driving EVs, as well as installing charging stations for their employees.

Additional Funding Sources Also Crucial

While a focus on increasing poor neighborhood access to reliable and affordable transportation options was vital to the final awarding of the Smart City Challenge competition to Columbus, the $90 million pledged by the Columbus Partnership (if the city was to be selected) also played a major role. Financing the development of smart city projects continues to be the most significant challenge in the market, as outlined in Navigant Research’s recently published Smart Citiesreport. The guaranteed added investment by the Columbus Partnership made the city a highly realistic option for successful implementation and more likely to achieve the outcomes that were highlighted in its final proposal.

In general, an autonomous vehicle could drive itself around based only on its sensing systems without having any access to maps. Unfortunately, while such a vehicle might be able to avoid collisions, this would severely limit the overall capabilities possible with its autonomy. The type of detailed maps with constant updates required to create a robust autonomous mobility on-demand system require substantial resources. This is something that startup Civil Maps is trying to address through crowd-sourced data collection.

Navigational Layers

“There are three layers to the navigational ecosystem for autonomous vehicles: strategic, tactical, and the decision engine,” said Civil Maps co-founder and CEO Sravan Puttagunta. “We are focused on the middle tactical layer that includes a more granular level of detail such as lane configuration, traffic signs, and signals.”

The strategic layer of mapping data includes the metadata about street names and directions of the type found in current navigation systems. This data can be used for overall routing to a destination; however, it is often inadequate for the low-level control that happens in the decision engine that sends commands to the vehicle actuators.

The tactical layer helps the decision engine determine which lane the vehicle should be in to make the turn that the strategic layer has asked for in 200 meters. This layer will know if the intersection has a traffic light, a four-way stop, or a roundabout. As a result of constant updates from vehicles in the field, it will also have awareness of lane closures and detours for construction—or just general road reconfiguration. While traditional mapmakers such as TomTom, Here, and Google (and now even Apple) have begun to collect this sort of data in specific areas, the update frequency is low.

Civil Maps has developed a software layer that automakers can integrate into vehicles that have depth perception sensors in order to turn them into real-time probes. To collect this type of data, a vehicle needs either a stereoscopic camera—like those used by Subaru and Daimler—or a lidar sensor. The company has also built a cloud platform that aggregates and validates the data by cross-checking it from multiple sources.

The raw sensor data would be processed locally in the vehicle and filtered into vector data for uploading to the Civil Maps platform. To make the amount of data processing and transmission manageable, the company has devised a task management system that would see different vehicles assigned to gather lane markings, traffic signals, and more.

Ford Fusion Autonomous Prototype Testing at Mcity

(Source: Ford Motor Company)

OEMs Key to Developing Revenue

Civil Maps is still working out the details of its revenue model, but Puttagunta acknowledged that it will likely have two components. In the future, when autonomous vehicles are deployed using Civil Maps data, OEMs may pay a license fee per vehicle for the base data set. But before that happens, there will be a credit system for data contributions and use. For every set of data uploaded from a vehicle, the OEM would earn credits that would be spent when updated data is withdrawn and sent to cars.

Navigant Research’s 2015 Autonomous Vehicles report projects that more than 4 million autonomous-capable vehicles could be sold by 2025, and these will all need detailed 3D maps. If automakers adopt the Civil Maps approach in the next few years, they could help build those maps without operating expensive fleets of street-view style vehicles.